Welcome to FAT Tuesdays, a weekly series featuring Financial Advice Tips each and every Tuesday of this month to help you attract and build wealth while repelling all the things that get in the way of that. One of the biggest culprits of building and maintaining wealth? DEBT. So, this week, we’re providing an overview of two tried and true strategies to reduce and eliminate your pesky debt, paving the way to Heaven on Earth, otherwise known as Financial Freedom.
Getting started with paying off debt can be really intimidating for some people. If “some people” is essentially you, then you might want to try the Debt Snowball.
With this plan, you start with the smallest debt that you have. While paying the minimum amount on all of your other bills, you start throwing any and all extra money you have at the smallest debt until it’s paid off. Once that debt has been eliminated, you take the money that you were paying towards that debt plus any money that was freed up by paying off said debt, and snowball all of that money into the next debt on the list – your next smallest debt. It’s a pretty effective method for knocking out debt while rewarding you with many small wins.
For those interested in taking a more aggressive approach to zeroing out their debt, allow us to introduce you to the Debt Avalanche method.
This method prioritizes paying off your high-interest loans and credit cards first. To employ, make a list of all of your loans and interest rates, listing them in the order of highest to lowest interest rate. Continue to make the minimum payment on all of your bills while funneling any extra money to the monthly payment with the highest interest rate.
Once you’ve paid off that card or loan, you then do the same with the next highest-interest rate payment. The key is to take the money that you freed up when you paid off the first debt and apply it to the second debt, all while continuing to pay the minimum on all of your other cards and loans. This method is often lauded by money experts because it saves you a lot of money in the long run, money that would have otherwise been swallowed whole by high-interest fees.
Ready to take a deeper dive? Visit the links below for practical strategies for reducing and managing your debt from three black women who have not only slayed the mighty debt beast, but lived to tell the tale, becoming successful money experts in their own right.
Pay Off Debt in Seven Steps and Still Maintain Your Lifestyle – The Budgetnista
How to Pay Down Credit Card Debt Quickly – The Frugal Feminista
Best Strategies and Tips to Crush Credit Card Debt – My Debt Epiphany